Strengthen merchant enablement as UPI leads payment modes: DFS report

The report identifies the need for targeted interventions to strengthen RuPay debit card usage, particularly in rural and semi-urban areas. Recommendations include focused merchant enablement programmes, promotion of low-value transactions through solutions such as UPI Lite, and continued investment in connectivity, digital literacy and fraud risk mitigation, the finance ministry said in a statement.

The socio-economic impact analysis is based on an extensive primary survey covering 10,378 respondents across 15 States. This includes 6,167 users, 2,199 merchants and 2,012 service providers, representing key stakeholders of India’s digital payments ecosystem, along with in-depth secondary research.

The evaluation indicates a significant and sustained increase in the adoption of digital payments across diverse socio-economic segments.

Among surveyed users, UPI has emerged as the most preferred mode of transaction, accounting for 57 per cent, surpassing cash transactions at 38 per cent. The preference is primarily attributed to ease of use and instant fund transfer capability.

Digital payments now dominate everyday transaction behaviour, with 65 per cent of UPI users reporting multiple digital transactions per day, as per the report.

The findings underline the growing acceptance of digital modes of payment across the country while also flagging the need to deepen the footprint of RuPay debit cards. The suggested measures aim to enhance merchant acceptance infrastructure, drive low-value digital transactions and ensure sustained policy support to strengthen the broader digital payments ecosystem.

The survey further showed that digital transactions in India have surged nearly 11 times between 2021 and 2025, with UPI emerging as the dominant payment method, accounting for around 80 per cent of all digital transactions.

The study found that 94 per cent of small merchants now accept UPI payments. About 72 per cent reported satisfaction with digital payments due to faster transactions, improved record-keeping and operational convenience, while 57 per cent saw an increase in sales following digital adoption.

The report noted that incentives helped lower cost barriers for merchants and banks, accelerated merchant onboarding and built trust in digital payment systems across income groups and geographies.